The Self Managed Super Fund (SMSF) administrative penalties draft regulations gives the Australian Taxation Office (ATO) the power to issue administrative directions (rectification direction or trustee education directions) and impose penalties for any non-compliance to the Superannuation Industry (Supervision) Act 1993 (Cwlth) by SMSF trustees.
Previously, the Regulator had limited options to address non-compliance. However, under this exposure draft the Regulator will be able to issue the following:
Rectification Direction
A person is required to undertake the specified action to rectify the non-compliance within a given time. He/She will need to provide evidence to the Regulator as proof of the compliance with the direction (instructions). Below are examples of non-compliance by SMSF trustee that may result in the issuing of “Rectification Direction” by the Regulator:
- past or existing borrowing of money from the funds to anyone, which is in violation of section 67(1)(a) or section 67(1)(b) of the Act;
- lent money to a member or relative of a member of a fund hence violating section 65(1)(a) of the Act; or
- allowing the value of the fund’s in-house assets to exceed 5% of the fund’s total assets’ market value at the end of the year of income and yet failing to carry out the steps under the written plan as stipulated by section 82(6) of the Act
Education Direction
This direction dictates that a person would need to attend a specified course of education (training) within a given time-frame. He/She will need to provide evidence of completion to the Regulator. Such a directive may be given where the person’s lack of knowledge and/or understanding of their obligations have contributed to their non-compliance of the SIS Act or SIS Regulations.
Administrative Penalties
The SMSF Trustee may be subjected to penalty. The penalties imposed are to be settled/paid by the same individual who had not complied and the penalties cannot be paid or reimbursed from assets of the SMSF. Examples of some of the current penalty amounts are shown below:
|
Provision of Act |
Summary of Compliance Matter |
Total |
|
Subsection 65(1) |
Lending to members |
$10.2k |
|
Subsection 67(1) |
Borrowing |
$10.2k |
|
Subsection 84(1) |
In-house assets |
$10.2k |
|
Subsection 103(1) & (2) |
Retain minutes of meetings for 10 years |
$1.7k |
|
Subsection 104A(2) |
ATO trustee declaration within 21 days |
$1.7k |
It is important that as a Trustee of a SMSF, you must ensure that you fully understand your responsibilities. If you are unsure, please talk to us.